Point of sale (POS) terminals enable merchants to receive payments from customers using a variety of payment methods such as credit cards, debit cards, smart cards, and gift cards, which are referred to herein as transaction cards. The use of POS terminals allows the customer the option of choosing a payment method that suits them, and as a result POS terminals are found at almost all merchant establishments.
Along with the increased deployment of POS terminals has come an increase in the theft of transaction card data. Through use of the merchant's payment system, thieves may attempt to replace a legitimate POS terminal, whether bank issued or otherwise, with a dummy device that can read and store transaction card data (including card numbers, and any authentication information entered by the users, names, etc.) from unsuspecting customers and without knowledge of the merchant. After a period of time has elapsed the dummy device can store considerable amounts of transaction card data and the dummy device may then be removed and replaced with the legitimate POS device. The data that is stored upon the dummy device can then be used to perform fraudulent transactions through use of the unsuspecting customer's account information. Where the thieves have not resorted to employing a dummy device in the merchant's system, the legitimate POS terminal is often modified or compromised by thieves to allow the transaction card data to be diverted to added storage devices which may then be subsequently retrieved and used for fraudulent purposes. Due to attempts made to compromise terminals and steal transaction card data, there is a need for a system and method for determining payment terminal fraud detection.